After shedding 4% on Wednesday, the S&P500 is now 18% below its all-time high and frightening close to a technical ‘bear market’ – a period where prices have fallen 20% or more from a recent peak.
Overnight on Wall Street, shares were battered by worries about an economic downturn, concerns over rising inflation, and ongoing geopolitical risks. The S&P 500 experienced its largest fall since June 2020 while the tech-heavy Nasdaq tumbled 4.7%.
The risk-off sentiment sent investors rushing from equities to safe-haven destinations like the dollar and gold. With the path of least resistance for the S&P500 pointing south and bears in the driving seat, the index may enter a bear market this week.
On the data front, it may be worth keeping a close eye on the US weekly jobless claims report published this afternoon. A weak report could fuel the selloff, dragging the S&P 500 deeper into the abyss. All in all, it’s the same old themes weighing heavily on global sentiment and stocks seem to be paying the price. Weak data earlier in the week from the two largest economies in the world already left a bitter taste in the mouth of many investors. With global growth concerns and inflation fears leaving market players on edge, equity bears are set to dominate the scene.
Taking a look at the technical picture, prices remain heavily bearish on the daily charts. There have been consistently lower lows and lower highs while the MACD trades to the downside. Given how the candlesticks are also well below the 50, 100, and 200-day Simple Moving Average, the technicals favour bears. A strong daily close below 3860 could trigger a selloff towards 3700. Should 3860 prove to be reliable support, prices could experience a rebound back towards 4100.